6 Reasons Why LLC Is the Right Structure for Your Startup

It’s essential for every business owner to choose the right legal structure for their company. This system decides the amount of liability your company takes on during litigation. Furthermore, it determines how much tax your company must pay as well as the amount of power you have within your organization. This article explores the six reasons why LLC is the right structure for your startup business abroad.

What Is a Business Legal Structure?

A business legal structure describes how your company conducts its daily operations. It decides the activities and projects that your business is authorized to undertake. Furthermore, it determines legal obligations and tax burdens as a business. There are four main types of business structures: Sole Proprietorship, Partnership, Corporation, and Limited Liability Company. For in-depth information on each option, you can find more on this page. 

Why Is a Business Legal Structure Important?

It’s easy to justify the importance of a business legal structure. Without it, your power over your company would be difficult to discern. Furthermore, you might end up dealing with more liability and costs than you actually need. 

Choosing a Limited Liability Corporation (LLC) structure is one of the best decisions you can make as a startup. Here’s why: 

No More Double Taxation

One of the many things that makes an LLC business structure the ideal choice for startups is that it can help you avoid double taxation. 

Double taxation typically occurs when a small business chooses a C-Corp legal structure. The business and the business owner are registered as two separate entities, so the owner ends up paying double the tax. 

LLCs are taxed more like a sole proprietorship. This means that the LLC does not have to pay taxes on company profits. The LLC’s members pay taxes on their portion of the LLC’s profits. Additional LLC taxes might be imposed by state or municipal governments.

Protect Your Assets

People choose an LLC business structure for one simple reason: to avoid liability for debts or fees that their business is involved in. In case of any unpaid or overdue debts, managers and owners won’t be held liable for any damages or costs; only the LLC. See this guide to learn more about how starting an LLC can protect your assets.

Less Paperwork

There’s considerably less paperwork that needs to be done when you have an LLC compared to when you have a corporation. LLCs don’t require a board of directors; they also don’t have regular shareholder meetings to keep track of. The only time you need to focus on paperwork is when you’re filing compliance-related papers.

Hierarchy Isn’t an Issue

LLCs are composed of members and managers. You can decide between a manager-managed or member-managed structure – whichever works best for everyone involved in the business. This makes LLCs much more flexible compared to other business structures. 

Inexpensive and Easy Registration

An LLC is one of the most inexpensive and easiest business structures to form. You don’t even need the help of an attorney if you do your research right. You simply need to pay a filing fee that costs more or less $100 to the federal government. Once that is settled, you can claim your Employer ID Number from the IRS, which you may use to open business bank accounts and checks. 

Fundraiser Flexibility

Your legal structure will also determine the types of fundraisers you can hold as a business. The great thing about LLCs is that they can operate any type of private fundraiser. At these events, your company can choose to offer free services and products, buy or sell donated goods, or even offer entertainment and amusement to attendees in exchange for donations. 

Of course, taxes and permits still need to be settled before your LLC can hold fundraisers and other activities. Contact your federal government for details about your state’s policies. 

Final Thoughts

Choosing a business legal structure may be what stands between a successful business and a flop. Although you can change your business structure at any point in your business’s development, it may not be easy and will cost more than if you choose the right legal structure the first time around. Don’t rush yourself when choosing a business legal structure. Assess your needs and preferences to help make the right decision in the end.